Tesla’s tipping point … the clever strategy to drive exponential growth in electric cars

April 5, 2016

Tesla’s CEO Elon Musk unveiled the highly anticipated Tesla Model 3 electric car on Thursday night in a converted LA aircraft hangar. Tesla’s launch events have become a little like Apple’s big moments used to be. Electrifying, a pioneering spirit, packed with hard core fans. Musk is much more improvised than the word perfect Jobs, stuttering with nerves that show he is human despite his vision and celebrity. The Model 3 has the potential to become the tipping point from carbon to carbon-free motoring, and to drive exponential growth for Tesla, and the electric car market. 250,000 preorders, almost two years ahead of delivery, demonstrates the consumer response.

In the Gamechangers project we explore in detail how Tesla has developed a long-term market-shaping strategy to change the game of car travel. The cars themselves, beautiful and technically wonderful, are not even the heart of the story. Nor is the innovative retail model, selling direct in upmarket shopping malls, customised on the iPad, cash in advance. Most significant is the overall business model – designed to shape the market through the world’s leading charging network – the Supercharger network, which is included as an ongoing subscription in the retail price, for Tesla and other brand cars. Supercharger is driven by another of Musk’s businesses, Solar City. By giving away much technical IP, Tesla is creating an industry standard in its own vision, on its own terms. It is redefining the game of motoring in front of our eyes.

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At the launch of the Model 3, Musk was at pains to explain his market entry strategy too. Starting from the expensive and niche roadster, to the other premium models, he has positioned the brand as innovative and aspirational, to compare with a Porsche or even Ferrari. Now he is moving down the price ladder to the wider market – to compete alongside the BMW and Audi-type brands, but with more magic, and sustainable credentials. He even thanked early adopters, those who had bought the early models at premium prices, saying that the profits he made through them has allowed him to build this new car for everyone (well at lot more people, and made him incredibly rich too).

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Tesla’s mass market Model 3  was driven onto a foggy stage in an extravagant unveiling, where Musk revealed that the Tesla Model 3 will seat five, and be able to cover at least 215 miles on one charge.   Musk said the standard Model 3 would be capable of zero to 60 miles per hour in less than 6 seconds, and will cost $35,000, which is half that of the company’s current flagship cars, the Model S sedan and Model X crossover. The new car actually looks like a more sporty version of the company’s Model S. The Model 3 will also feature Autopilot for assisted driving and be future-proof for self-driving road use. Deliveries begin in late 2017, by which time Tesla says it will have doubled the number of charging stations worldwide and will include charging for free.

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The Model 3 is Tesla’s attempt to bring electric cars to the mass market and is considered critical to the company’s future success.  Interest has been strong, with preorders for the Model 3 at Tesla stores and galleries – some of which are located directly adjacent to Apple retail stores (where the launch of the iPhone SE no longer commands the long queues of old). Musk later boasted on stage that the company had already secured 115,000 reservations before the car had even been revealed (a figure that has doubled in the last few days). Tesla’s stock price rocketed too.

You can watch the full unveiling of the Tesla Model 3 here:

Apple is believed to be working on its own electric road vehicle, commonly referred to as the Apple Car (rather than iCar, in a similar naming logic to the Apple Watch), which Musk has called an “open secret” in the industry. According to Musk, the hundreds of engineers Apple has taken on make it clear there’s an electric car in the works. Apple and Tesla have hired each other’s employees over the last couple of years, with Musk saying that Apple has hired away “very few people” from the car company despite offering $250,000 signing bonuses and 60 percent salary increases to its employees. Tesla meanwhile has hired nearly 150 Apple employees.

Read more about Tesla and how it is changing the game.

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